Oregon’s Surprising Solar Industry

Oregon, ranked 27th by population, is ranked 9th in US solar energy according to the Solar Energy Industry Association. At the close of 2008, Oregonians had installed 4.8 MW, a 330% increase over 1.1 MW in 2007. Oregon is 7th overall in cumulative US installations with 7.5 megawatts.

This is due in large part to an innovative and well run slate of state incentives and subsidies. The largest single installation is the state is the 858 KW system onthe roof of the Portland Portland Habilitation Center (PHC). Theinstallation uses 4,766 Day 4 modules, was installed by Dynalectric,and Commercial Solar Ventures of Portland brought US Bank and others toform a structured partnership to fund the $7.5 million installation. It may be the first significant example of 3rd party finance in Oregon.

There is very little activity in Oregon’s 3rd party finance market. In several states, solar developers own and operate solar power systemsand sell electricity to a “host” customer through a power purchaseagreement (PPA). PPAs were approved 2007, but collapse of US financialmarkets may have delayed expansion of PPAs into Oregon. Also, mostOregon banks rejected the type of 3rdparty investment thathas fueled meteoric growth of PPAs in other states. However, SunEdison(leading US PPA company) and SolarCity (residential leasing) haverecently entered the Oregon market.

Oregon may have one of the best state incentive programs in the nation. In combination with federal cash grants and tax subsidies, Oregon’s cash buy-down program and state tax credits can re-pay 90% of the initial construction cost of a solar installation. The simple payback period is about three years for commercial projects.

Energy Trust of Oregonis a ratepayer funded non-profit tasked with investing in effectiveenergy conservation and offsetting the “above-market” costs ofrenewable energy. Along with energy efficiency programs, Energy Trust offers a solar “buy-down” program that pays up to $640,000 of a project’s cost. Cash payments from the buy-down program range from $0.90 to $1.75 perinstalled watt depending system size and utility service area.

The Oregon Department of Energy (ODOE) administers what may be the most innovative solar incentive in the nation. The Oregon tax code grants a 50% state tax credit for business thatinstall solar power systems (Business Energy Tax Credit or BETC). Forthose who do not need the tax credit, the ODOE administers a “pass-through”program wherein individuals exchange their tax credit for a discountedcash payment equal to 33.5% of the initial cost of the system.

Many US states are in the process of developing a serious solar incentive program to meet climate and energy challenges. Oregon’s Energy Trust and ODOE’s BETC (Betsy) programs could be a model for emerging incentive programs across the US.

Solar energy in Oregon still faces several challenges. Oregon also has a surprisingly small percentage of commercial projects. In conversations with building and facilities managers we foundsignificant resistance to the initial cash outlay. We also learnedthat commercial lease structures were an obstacle.

There are other clouds on the Oregon horizon. The state legislature is planning to cut or eliminate the Business Energy Tax Credit citing budget shortfalls. Governor Ted Kulongoski vetoed a similar bill (HB2472) earlier this year. This is a serious challenge to Oregon’s solar future. Many in theindustry believe that killing the BETC will severely limit commercial,and perhaps, any future utility-scale solar in Oregon.

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